For 2022, the annual gift tax exclusion amount has been increased from $15,000 to $16,000 per recipient (or $32,000 for married couples), as the IRS recently announced in Rev. Proc. 2021-45. This adjustment applies to gifts of “present interests,” which include an outright gift to the recipient or a gift to a trust from which the beneficiary can withdraw the property.
The IRS also announced the annual inflation adjustment for the federal gift, estate, and generation-skipping transfer (GST) tax exemption, which increases the amount sheltered from taxes from $11,700,000 for 2021 to $12,060,000 as of January 1, 2022.
This increase may be of particular interest to individuals who previously used all of their gift, estate, or GST tax exemption to facilitate significant lifetime transfers. They can now gift that extra $360,000 for 2022 ($720,000 for a married couple). Absent congressional action, the exemption amount is scheduled to revert to an inflation-adjusted $5,000,000 on January 1, 2026—which we anticipate will end up being roughly $6,000,000.
If your spouse is not a citizen of the United States, the amount you can gift to your spouse annually during your lifetime has increased from $159,000 to $164,000.
The gift, estate, and GST tax rate remains at a flat 40% for 2022 for taxable transfers (aggregate of taxable transfers during life and at death) that exceed the transferor’s available exemption.
If you have questions about these changes or any other estate planning questions, please contact Jane Peebles or Cynthia Brittain.